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Like in the original Asteroids the objective is to score as many points as possible by destroying asteroids and flying saucers. The player controls a ship that can rotate left and right, fire shots straight forward, and thrust forward. Asteroids Deluxe replaces the hyperspace feature with shields which deplete with use. Other differences include asteroids which rotate and a new enemy which is dubbed a "killer satellite" which would, when shot, break apart into three smaller ships that homed in on the player's position.

The Asteroids Deluxe arcade machine is a vector game. This means that the game graphics are composed entirely of lines which are drawn on a vector monitor. The hardware consists primarily of a standard MOS 6502CPU, which executes the game program, and the Digital Vector Generator (DVG), vector processing circuitry developed by Atari themselves. As the 6502 by itself was too slow to control both the game play and the vector hardware at the same time, the latter task was delegated to the DVG.

Asteroids Deluxe also features various sound effects, most of which are implemented by its own circuitry but some sounds are generated using the Atari POKEY sound chip.